Technical Analysis

GOLD Price Analysis – Aug 21, 2023

By LonghornFX Technical Analysis
Aug 21, 20234 min
Signal 2023 05 25 122622 002

Daily Price Outlook

Gold (XAU/USD) price has been on a decline lately, hitting its lowest point in five months. However, the reason behind this dip is that many investors are turning to the US Dollar as a safe haven due to uncertainties surrounding important events and data scheduled for this week. Adding to the downward pressure on the XAU/USD is the negative sentiment surrounding China, a major consumer of commodities. Despite this recent decline, it's worth noting that the gold price is still holding above its key support level of $1,700 per ounce.

This could indicate that the sellers might be losing their grip, potentially setting the stage for a rebound in the near future. The upcoming economic data and events from the US could play a significant role in steering the direction of the gold price.

China's Economic Woes Weigh on Gold Prices

China holds a significant position as one of the globe's largest users of commodities, which means that any concerns about its economy can send waves through various markets, including impacting the price of gold. In recent months, China has faced a series of hurdles such as a slowdown in economic expansion, trade tensions with the US, and a challenging property situation. These issues have cast a shadow over investor confidence and have contributed to the dip in gold prices.

According to the latest news, the People's Bank of China (PBoC) recently made a significant move. On Monday, they decided to lower the one-year Loan Prime Rate (LPR) by 10 basis points, bringing it down from the previous 3.55% to a new rate of 3.45%. Simultaneously, they opted to maintain the five-year LPR at a steady level of 4.2%. This decision comes in the midst of ongoing challenges within China's property sector, sluggish consumer spending, and a noticeable decline in credit growth. Consequently, China's economic recovery has hit a bit of a stumbling block.

The PBoC's decision to lower the one-year Loan Prime Rate reflects concerns about China's economic challenges. As these difficulties persist, the move might alleviate pressure on gold prices by signaling potential government intervention to stimulate the economy, thereby influencing market sentiment and curbing potential declines.

US Dollar Strength Underscores Gold's Weakness

The US dollar is often considered a safe-haven choice, and when it gains strength, it tends to put pressure on gold prices. This is because gold is viewed as riskier compared to the dollar. Lately, the US dollar has been on the rise, influenced by factors like the Federal Reserve's cautious approach and the ongoing US-China trade tensions.

Federal Open Market Committee (FOMC) meeting showed that inflation is still too high, and officials are really worried about it. They said they might need to raise rates more to get inflation under control and will decide based on new information. This week, everyone's looking forward to Federal Reserve (Fed) Chairman Jerome Powell's talk at the Jackson Hole Symposium.

Apart from this, market watchers will focus on S&P Global Purchasing Managers' Indexes (PMI) figures and central bankers' statements for insights.

GOLD Price Chart – Source: Tradingview
GOLD Price Chart – Source: Tradingview

GOLD (XAU/USD) - Technical analysis

The gold price has exhibited initial positive movement from today's opening, positioning itself for an anticipated examination of the resistance within the bearish channel. This trajectory is influenced by the current positive momentum of the stochastic indicator, suggesting a potential resumption of the bearish trend, with its next focal point projected around the $1873.50 mark.

The prevailing negative influence originating from the EMA50 reinforces the projected bearish wave. It's worth noting that, should the price manage to surpass the $1895.00 threshold, this could trigger additional upward momentum, potentially leading to a test of the noteworthy resistance at $1913.15, prior to any subsequent attempts at decline. The anticipated trading range for the day spans between the support at $1873.50 and the resistance at $1900.00.

In terms of the expected trend for today, a bearish sentiment is anticipated to persist.



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